nep-int New Economics Papers
on International Trade
Issue of 2006‒12‒01
thirty-six papers chosen by
Martin Berka
Massey University

  1. The impact of trade reforms on the extensive margin of trade. By Maria Bas; Ivan Ledezma
  2. Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade By Keith Walsh
  3. The Hong Kong Declaration and Agriculture: Implications for Bangladesh By Uttam Kumar Deb; Narayan Chandra Das
  4. Openness, Specialization and Growth By Luca De Benedictis
  5. Trade relation between MERCOSUR, NAFTA, Andean community and UE15: An analysis in term of trade creation – trade deviation (In French) By Dalila NICET-CHENAF (CED-IFReDE-GRES)
  6. The Free Trade Agreement between Colombia and USA: What can happen to Colombia? By Orlando Gracia; Hernando Zuleta
  7. Market Integration and Industrial Modernization : A Global Middle Class Perspective By Alain Desdoigts; Fernando Jaramillo
  8. On Trade and Poverty-Induced Comparative Advantage By Robert Maseland; Albert de Vaal
  9. The Geography of Trade in Goods and Asset Holdings By Aviat, Antonin; Coeurdacier, Nicolas
  10. Does Preferential Trade Benefit Poor Countries? A General Equilibrium Assessment with Nonhomothetic Preferences By Albert de Vaal; Joachim Stibora
  11. Learning-by-Doing, Learning-by-Exporting, and Productivity: Evidence from Colombia By Ana M. Fernandes; Alberto E. Isgut
  12. Evaluating China’s integration in world trade with a gravity model based benchmark By Matthieu Bussière; Bernd Schnatz
  13. Trade, Growth, and Technology Equalization By John J. Seater
  14. Trade Liberalization and Demand for Skill in Brazil By Menezes Filho, N. A.; Giovannetti, Bruno
  15. Intra-firm trade and European integration: Evidences from the French multinational agribusiness By CHEVASSUS-LOZZA Emmanuelle; GALLIANO Danielle
  16. Openness To Trade as a Determinant of the Elasticity of Substitution between Capital and Labor By Marianne Saam
  17. A Signaling Model of Quality and Export: with application to dumping By C. Simon Fan; Yifan Hu
  18. Openness can be good for Growth: The Role of Policy Complementarities By Roberto Chang; Linda Kaltani; Norman Loayza
  19. Cross-Border Flows of People, Technology Diffusion and Aggregate Productivity By Thomas Barnebeck Andersen; Carl-Johan Dalgaard
  20. Borders, Endogenous Market Access and Growth By Tomasz Michalski
  21. Do Trade Costs in Goods Market Lead to Home Bias in Equities? By Coeurdacier, Nicolas
  22. Population Growth Overshooting and Trade in Developing Countries By Ulla Lehmijoki; Tapio Palokangas
  23. Human Capital, Trade, FDI and Economic Growth in Thailand: What causes What? By Sailesh Tanna; Kitja Topaiboul
  24. New Evidence on Product Quality and Trade By Hasan Faruq
  25. The impact of globalisation and trade on the productivity performance of the Irish food manufacturing sector By Carol Newman
  26. The Solow Model in the Empirics of Cross-Country Growth By Erich Gundlach
  27. Development Accounting in a Heckscher-Ohlin World By Harald Fadinger
  28. Labor Market Structures, Trade and their Effect on Unemployment: A Theoretical Analysis and Empirical Investigation By Sebastian Weber
  29. Trade and the structure of cities By Jean Cavailhes; Carl Gaigne; Jacques-Rrancois Thisse
  30. Technological Backwardness in Agriculture: Is It due to Lack of R&D Expenditures, Human Capital and Openness to International Trade? By Rodolfo Cermeño; Sirenia Várquez
  31. Northern and Southern Patent Novelty Requirements Harmonization, Growth and Trade By Gilles Koléda
  32. Notes on Factor Price Equality and Biased Technological Change in a Two-Cone Trade Model By Daniel Becker; Erich Gundlach
  33. The Simplest Possible 2x2x2 CGE Diagranomics: Revisiting the H-O, S-S Orthodoxies By Hiroshi Ohta
  34. Trade and Private R&D in Mexico By Liliana Meza González; Ana Belén Mora Yague
  35. Antidumping Procedures and Macroeconomic Factors By Mustapha Sadni Jallab; René Sandretto; Monnet Gbakou
  36. Export Outsourcing and Foreign Direct Investment: Evidence from Taiwanese Exporting Firms By Bih Jane Liu; An-Chi Tung

  1. By: Maria Bas; Ivan Ledezma
    Abstract: This paper develops an inter-industry model of trade with heterogeneous industries to analyze the impact of trade liberalization on the extensive margin of trade. The model extends the work of Melitz (2003), incorporating endogenous labor productivity gains determined by an initial investment in technology, embodied in imported capital goods. Industries are differentiated by the impact of this technology on labor efficiency. Trade liberalization reduces the price of imported capital equipment and increases factor demands. Depending on the reaction of labor productivity to the new technology, both effects have a different impact on industries. This mechanism introduces two results. First, the process of trade liberalization is biased towards industries where imported technologies have a higher impact on labor productivity. Second, a reduction of tariffs would have little impact on the extensive margin of trade in countries already highly open.
    Date: 2006
  2. By: Keith Walsh
    Abstract: This paper assesses the determinants of trade in services using a gravity model, with particular attention given to the role of barriers to services trade. Initially, the application of the gravity equation to services trade is examined. A variety of econometric estimators are tested and the Hausman-Taylor model is found to be the best estimator. The gravity model fits services trade flows in a similar manner to trade in goods. Wealth of countries and a common language are the most important determinants of services trade, distance is generally found to be insignificant. A variable measuring barriers to services trade is introduced into the gravity equation. Although the variable is only found to be weakly significant, a quantified set of tariff equivalents of those barriers is estimated.
    Date: 2006–11–16
  3. By: Uttam Kumar Deb; Narayan Chandra Das
    Abstract: This paper reviews the developments in WTO negotiation on agriculture in the light of the Hong Kong Ministerial Declaration. It has critically analysed the decisions and negotiating proposals adopted through the Declaration. The paper has also analysed possible impacts of the adopted decisions and proposals for Bangladesh’s agriculture sector and its economy. Potential impacts are measured in terms of reduction in tariff, domestic support and export subsidy. More importantly, the paper has quantified potential impacts of agricultural trade liberalisation under Doha Round negotiations on prices and welfare gains, production, consumption and trade of agricultural commodities in Bangladesh. Based on the research findings, the paper has suggested some negotiating strategies for Bangladesh to be pursued in the on-going WTO negotiations on agriculture.
    Keywords: Agriculture, WTO, Hong Kong Ministerial, Bangladesh
    Date: 2006–05
  4. By: Luca De Benedictis
    Abstract: This paper explores the link between trade and growth showing how the relationship between openness and per capita income is contingent to the size and the level of export specialization of countries. Measuring openness both in terms of trade volumes and trade policies, and specialization as a index of the position of the distribution of sectoral revealed comparative advantages, the paper - using parametric and semiparametric panel data analysis - offers a precise taxonomy of the effects of openness on growth according to the size and the specialization of countries. The effect of openness on growth is enhanced by the diversification of sectoral exports characterized by comparative advantages, and is reduced by the physical or economic dimension of the country considered. The effect is however nonmonotonic: an increase in openness is relevant for growth at low levels of openness, specialization is effective only at early stages of development, while is differentiation that enhances growth at higher levels of per capita income.
    Keywords: International Trade, Specialization, Revealed Comparative Advantage, Openness, Semiparametric Panel data, Cross-country regression
    JEL: C14 F10 F43 O57
    Date: 2006–06
    Abstract: This paper determines which gravity models are the best adapted to the study of the trade evolution of several economic areas and the behaviors heterogeneity of the countries that belong to these areas (fixed effect model; random effect model). Applied to the countries of UE15, NAFTA, MERCOSUR, Andean community and APEC, the retained model contains random bilateral effects and has proved to be the most suited to describe the specific bonds between different countries. It enables also to apprehend, in terms of trade creation and trade diversion, the trade relations between the countries of the reference areas and MERCOSUR in particular.
    Keywords: Trade creation and trade deviation, Trade block Régional, Trade agreements, Gravity Models, Fixed effect model, Random effect model
    JEL: F14 F15 C33
    Date: 2006
  6. By: Orlando Gracia; Hernando Zuleta
    Abstract: In order to assess the impact of a Free Trade Agreement (FTA) between Colombia and the United States of America, we describe the characteristics of the Colombian economy emphasizing its trade patterns and perspectives and identifying the sectors and regions that are likely to be the most sensitive to a FTA. We argue that the effects of a bilateral trade agreement between the USA and Colombia would be similar to those of past trade reforms. However, as Colombia and the USA negotiate the agreement, many other Latin American countries are about to sign trade agreements with the USA. Therefore, the Colombian economy is likely to be affected also by the change in trade rules among its partners. We first analyze the effect of past reforms in Colombia and Mexico, which is our benchmark, and then, using an applied multiregional general equilibrium model, simulate the effects over the Colombian economy of a bilateral agreement with USA. We conclude that, although moderate, there will be an increase in welfare and production of the Colombian consumers and firms.
    Keywords: International Trade Agreements, Colombia, multiregional model
    Date: 2005–06
  7. By: Alain Desdoigts (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I], LEG - Laboratoire d'Economie et de Gestion - [CNRS : UMR5118] - [Université de Bourgogne]); Fernando Jaramillo (Universidad de Los Andes - [Facultad de Economia])
    Abstract: This paper highlights cross-boarder aspects of demand spillovers on (de-) industrialization into international environments with extra profits-making firms. We develop an inter- and intra-industry trade genera equilibrium model featuring hierarchic and ideal-type preferences as well as inequality in labor income and shareholding. Its key feature is the introduction of complementarities propagating across both industries and boarders, which yield global profit (de-) multiplier effects. When firms are domestically-owned, trade-induced global in their scope horizontal complementarities benefit the less homogeneous middle class/more competitive/smaller trade partner. As long as differences in technology are not too large, technological catch-up growth leads the share of higher-priority goods in GDP to suffer erosion in the advanced trade partner and modernization to accelerate in those sectors which produce higher-income elasticity goods in both trade partners. However, the free trade multiplier effect is strengthened (weakened) at the aggreate level in the lagging (leading) country.
    Keywords: Horizontal complementarities, hierarchic preferences, world middle class, deindustrialization, trade.
    Date: 2006–11–03
  8. By: Robert Maseland; Albert de Vaal
    Date: 2005–06
  9. By: Aviat, Antonin (PSE (joint research unit CNRS-EHESS-ENPC-ENS)); Coeurdacier, Nicolas (ESSEC Business School)
    Abstract: Gravity models have been widely used to describe bilateral trade in goods. Recently, Portes and Rey [1999] applied this framework to cross border equity flows and found that distance, which proxies information asymmetries in financial markets, is a surprisingly very large barrier to cross-border asset trade. We adopt here a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings. We jointly study trade in goods and banking assets in a simultaneous gravity equations framework using different instruments for both endogenous variables. To instrument trade in goods, we choose geographical variables (excluding distance) and data on bilateral transport costs. For asset holdings, we use legal similarities between countries and data on the international taxation of withheld capital. We find that the strong correlation between bilateral trade in goods and asset holdings is not simply due to distance: bilateral trade in goods generates bilateral asset holdings and vice versa. Those effects are of first order magnitude: a 10% increase in trade generates a 6 to 7% increase of asset holdings, and a 10% increase in banking claims induces a 2 to 3% increase in trade. Finally, we investigate the question of the remaining impact of distance. We find out that the impact of distance on trade in goods is only slightly reduced, while for asset holdings, a large part of the effect of distance is going through trade.
    Keywords: Gravity Models; International Finance; International Trade; Simultaneous Equations
    JEL: C31 F10 F36
    Date: 2006–10
  10. By: Albert de Vaal; Joachim Stibora
    Abstract: We study the effects of preferential trade agreements (PTA) in a model where the income matters for consumption patterns. We develop a three-country Ricardian trade model in which goods are ranked according to priority and where economies differ in their income level. The poorest (richest) country has a comparative advantage in the production of lowest-ranked (highest-ranked) goods, specializing in goods with low (high) income elasticities in demand. The medium rich country specializes in the production of the intermediate-ranked commodities. We .nd that being excluded from a PTA is detrimental for a low-income country, but not for the high-income country. Becoming a member of a PTA does also not guarantee welfare gains for the low income country, unless it is so poor that it cannot import the higher-ranked goods that the rich country produces.
    Keywords: Ricardian trade model; asymmetric demand complementarities; Customs Union; income distribution
    Date: 2006–06
  11. By: Ana M. Fernandes; Alberto E. Isgut
    Abstract: The empirical evidence on whether participation in export markets increases plant-level productivity has been inconclusive so far. We explain this inconclusiveness by drawing on Arrow's (1962) characterization of learning-by-doing, which suggests focusing on young plants and using measures of export experience rather than export participation. We find strong evidence of learning-by-exporting for young Colombian manufacturing plants between 1981 and 1991: total factor productivity increases 4%-5% for each additional year a plant has exported, after controlling for the effect of current exports on total factor productivity. Learning-by-exporting is more important for young than for old plants and in industries that deliver a larger percentage of their exports to high-income countries.
    Keywords: learning, trade, total factor productivity, exports, export-led growth
    Date: 2005–06
  12. By: Matthieu Bussière (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany); Bernd Schnatz (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany)
    Abstract: The rapid transition of China from a closed agricultural society to an industrial powerhouse has been associated with a rapid increase in the share of China in world trade. As the world is taking the full measure of this phenomenon, tensions have been arising ranging from holding China partly responsible for global imbalances to complaints about the “excessive” competitiveness of Chinese products. Without a quantifiable benchmark, however, such claims are difficult to judge. This paper therefore provides an assessment of China’s “natural” place in the world economy based on a new set of trade integration indicators. These indicators are used as a benchmark in order to examine whether China’s share in international trade is consistent with fundamentals such as economic size, location and other relevant factors. They constitute a better measure of trade integration that incorporates many more factors than traditional openness ratios. Results show that the model tracks international trade well and confirm that China is already well integrated in world markets, particularly with North America, several Latin American and East Asian emerging markets and most euro area countries. JEL Classification: C23, F15, F14.
    Keywords: Gravity Model, Panel Data, Trade, China.
    Date: 2006–11
  13. By: John J. Seater
    Abstract: Trade is shown to increase economic growth purely through comparative advantage without recourse to scale effects, technology transfer, research and development, or even international investment. The resulting growth rates are those that would result from technology transfer, even though no technology transfer actually occurs. A balanced growth rate exists, is identical for all countries and therefore the world, and is asymptotically stable if and only if each country has an absolute (not just comparative) advantage in something. When balanced growth does not exist, trade reduces but does not eliminate differences between countries’ growth rates. Trade therefore does not necessarily guarantee a stable world income distribution. The magnitude of trade's effect on growth depends on the goods imported, not those exported.
    Keywords: trade, growth, technology equalization, comparative advantage, absolute advantage, world income distribution
    JEL: O4 F15
    Date: 2005–06
  14. By: Menezes Filho, N. A.; Giovannetti, Bruno
    Date: 2006–10
  15. By: CHEVASSUS-LOZZA Emmanuelle; GALLIANO Danielle
    Abstract: This paper aims firstly to determine the factors that lead multinational firms to internalise their international exchanges and secondly to analyse the impact of the implementation of the European Single Market on their strategies. This study is based on the “Industrial Globalisation” survey conducted by the French statistics institutes in 1993 and in 1999. With regard to French agro-food trade, the results show that there has been an increase in intra-firm trade within the EU borders and the European MNEs’ networks. The main determinants of intra-firm trade are the firms’ need to generate economies of scale and to protect and exploit their “firm-specific advantages” related to the technology and to the nature of the product. The model not only reveals the groups’ strategy to penetrate the EU markets and to bypass borders, but it also sheds light on the role and the development of intra regional networks of subsidiaries.
    Keywords: Intra-firm trade, Agro-food industry, Single market, Multinational firms
    JEL: F10 F14 F23
    Date: 2006
  16. By: Marianne Saam
    Abstract: Some recent work on economic growth considers the aggregate elasticity of substitution between capital and labor as a measure of economic flexibility. It is thought to depend on technological and institutional determinants. I study how a openness to trade affects the aggregate elasticity of substitution of a large country in a Heckscher-Ohlin model with trade in intermediates and equalization of factor prices. With constant capital stocks, trade enlarges the set of available intermediates in the same way as a rise in the elasticity of substitution in their production would. An optimal tariff corresponds to an additional rise in the elasticity of substitution. In two growing economies, trade only rises the elasticity of substitution of the GDP function of the faster growing country.
    Keywords: aggregate elasticity of substitution, normalization, Heckscher-Ohlin model, capital accumulation
    JEL: F11 E23
    Date: 2005–06
  17. By: C. Simon Fan; Yifan Hu
    Abstract: Extending the literature on quality and trade and supported by the empirical evidence obtained from China, this paper demonstrates that in a developing country, a firm’s export to developed countries has a potential signaling effect on domestic consumers’ perception of its product quality. The model analyzes the signaling and imitating strategies of different types of firms in their decisions to export, and characterizes the conditions for the separating, pooling, and hybrid equilibria. Next, the analysis shows that the strategic exporting of low-quality producers under informational asymmetry can result in dumping. Moreover, the model shows that the implementation of antidumping measures of foreign countries can lead to a Pareto improvement for the firms and consumers of the home country under some circumstances.
    JEL: D82 F10 F13 L15 O12
    Date: 2006–06
  18. By: Roberto Chang; Linda Kaltani; Norman Loayza
    Abstract: This paper studies how the effect of trade openness on economic growth depends on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris-Todaro type of model where output gains after trade liberalization depend on the degree of labor market flexibility. In that model, trade protection may ameliorate the problem of underemployment (and underproduction) in sectors affected by labor market distortions; hence trade liberalization unambiguously increases per capita income only when labor markets are sufficiently flexible. We then present some panel evidence on how the growth effect of openness depends on a variety of structural characteristics. For this purpose, we use a non-linear growth regression specification that interacts a proxy of trade openness with proxies of educational investment, financial depth, inflation stabilization, public infrastructure, governance, labor-market flexibility, ease of firm entry, and ease of firm exit. We find that the growth effects of openness are positive and economically significant if certain complementary reforms are undertaken.
    Keywords: Openness, Growth, Economic Reform, Policy Complementarity
    JEL: E61 F13 F43 O40
    Date: 2005–06
  19. By: Thomas Barnebeck Andersen; Carl-Johan Dalgaard
    Abstract: A number of empirical studies have investigated the hypothesis that cross-border flows of goods (international trade) and capital (FDI) lead to international technology diffusion. The contribution of the present paper consists in examining an as yet neglected vehicle for technology diffusion: cross-border flows of people. We find that increasing the intensity of international travel, for the purpose of business and otherwise, by 1% increases the level of aggregate total factor productivity and GDP per worker by roughly 0.2%.
    Keywords: Technology diffusion, Productivity, IV estimation
    Date: 2006–06
  20. By: Tomasz Michalski
    Abstract: We discuss the role of contracting impediments created by the existence of national borders on open economy growth. In a two-good neoclassical Ramsey growth model with lack of enforcement on international trade contracts we show that endogenous trading constraints with positive trade may arise on the transition path towards an open-economy steady state. These constraints may bind more severely low-income economies. Dynamic incentives to fulfill international contracts are easier to provide to high-income agents that have a stronger love-of-variety and investment motives to trade internationally. Investment in capital serves thus as a commitment device. The extent of the impediments may render countries unable to engage in international exchange at all, in effect keeping them in a poverty trap. Countries with dissimilar initial capital per capita may converge to different steady states. Contracting problems in international exchange may block the channel through which, as many researchers believe, international trade affects growth by increasing investment rates. The model provides a new explanation for the correlations observed in the data, for example that the trade/GDP ratio across countries is positively related with income per capita. Our model and its extensions add to the understanding of a number of puzzles (inter alia "the missing trade") in international economics. Using new data on trade credit in international transactions we provide correlations supporting the view that collection risks hinder international exchange. Policy implications stress the role of promoting contract enforcement and trade liberalization.
    Keywords: trade, growth, limited commitment, borders, poverty trap
    JEL: D86 F15 F34 F43 O16 O4
    Date: 2006–06
  21. By: Coeurdacier, Nicolas (ESSEC Business School)
    Abstract: Two of the main puzzles in international economics are the consumption and the portfolio home biases. They are empirically related: countries that are more open to trade also have more internationally diversified portfolios. In a two-country stochastic equilibrium model, I prove that introducing trade costs in goods market alone, as suggested by Obstfeld and Rogoff [2000], is not sufficient to explain these two puzzles simultaneously. On the contrary, for reasonable parameter values, trade costs create a foreign bias in portfolios. To reconcile facts and theory, I introduce a combination of small frictions in financial markets and trade costs in goods market. The interaction between the two types of frictions determines optimal portfolio allocation. When trade costs increase, competition in the goods market softens and the volatility of domestic income falls. Facing lower risk, investors have less incentive to pay the financial transaction cost and increase their holdings of domestic assets. The model correctly predicts that the larger the home bias in consumption, the larger the home bias in portfolios.
    Keywords: International Macroeconomics; Home Bias; Portfolio Choice; Trade Costs
    JEL: F30 F36 F41 G11
    Date: 2006–10
  22. By: Ulla Lehmijoki; Tapio Palokangas
    Abstract: This paper examines a developing economy by a family-optimization model in which the number of children is a normal good in preferences. Trade liberalization generates two effects: an income effect, which raises population growth in the short run; and a gender wage effect, which decreases that in the long run. With higher income, families invest more in capital. Because female labor is more complementary to capital, a higher level of investment increases women's relative wages and attracts more of them from child rearing into production. Consequently, the population growth rate falls below the original level in the long run. This paper also provides some empirical evidence on these results.
    Keywords: Keywords: population growth, international trade
    JEL: O41 J13 J16
    Date: 2006–06
  23. By: Sailesh Tanna; Kitja Topaiboul
    Abstract: We investigate the causal links between human capital, openness through trade and FDI, and economic growth using quarterly data for Thailand over the period 1973:2-2000:4. A number of hypotheses are investigated including, in particular, FDI-led growth and export-led growth, as well as the reverse linkages from growth to FDI and exports. The importance of human capital is highlighted as complementary to trade and FDI inflows, underlying the importance of technology adoption. We find that, after controlling for domestic investment, government expenditure and imports, support for FDI-led growth is not as strong as export-led growth, although allowing for the joint interaction of FDI and human capital reveals a positive FDI effect above a minimum threshold of human capital, estimated to be around 4.5 years of average secondary schooling attainment. Extending our study using multivariate causality tests conducted within a vector error correction framework, we also find significant effects of domestic investment and trade openness, providing support for import-led growth, but direct support for FDI-led growth as well as growth-led FDI is again relatively weak, reinforcing the conclusion that trade openness has played a more significant role than FDI in influencing Thai economic growth. But the results reveal a subtle role for technology transfer through the complementary effect of trade on FDI, and FDI on government expenditure, which thereby influences human capital development with spillovers onto domestic investment and growth. This leads us to argue that there is a potential role for FDI interacting with human capital in influencing the future development of the Thai economy, given its recently active policy of FDI promotion.
    Keywords: Trade Openness, FDI, Growth, VECM, Technology Adoption
    Date: 2005–06
  24. By: Hasan Faruq (Indiana University Bloomington)
    Abstract: This paper examines why different countries export different qualities of products.Previous studies have attributed quality dispersion to differences in factor endowments while no empirical work has been done examining the effect of technology on quality. Using panel data on U.S. imports from 58 countries, we find that the export of high quality differentiated goods is associated with both higher stock of physical capital endowments and research and development (R&D) activities. We also observe that foreign direct investment (FDI) has a positive effect on quality, which is consistent with the literature on FDI and intra-industry trade. These results cannot be replicated by using the reduced form OLS price regression which is commonly used in the literature. Instead, we use a two-equation system in price and quantity to identify the determinants of quality.
    Keywords: Product Quality, Differentiated Products, Heckscher-Ohlin Model, R&D
    JEL: L15 F11 Q16
    Date: 2006–11
  25. By: Carol Newman
    Abstract: Globalisation and international integration can yield efficiency gains through the promotion of competition and trade in markets for internationally traded goods. At the firm level, exposure to competitive pressures has created a necessity for firms to operate as close as possible to the technology frontier in order to survive. Furthermore, increased integration has lead to an influx of investment by Multinational corporations who bring with them technological innovations. This has the effect of improving overall productivity by shifting the best practice technology frontier while at the same time making it increasingly difficult for smaller competitors to survive. In an Irish context, the food industry has recently been acknowledged in national policy as an important sector for future development. The aim of this paper is to measure the productivity performance of the food processing industry in Ireland and establish the extent to which globalisation has brought about efficiency and productivity gains to the industry.
    Keywords: Food Industry, Ireland, Productivity, Stochastic Production Function
    Date: 2006–11–16
  26. By: Erich Gundlach
    Abstract: Translated to a cross-country context, the Solow model (Solow 1956) would predict that international differences in steady state output per person are due to international differences in technology such that the capital output ratio is constant for international differences in steady state capital intensities. Most of the cross-country growth literature that refers to the Solow model has employed a specification where steady state differences in output per person are due to international differences in the capital output ratio for a constant level of technology. My empirical results show that the cross-country data can also be summarized by an alternative empirical specification of the Solow model that uses a measure of institutional technology as an explanatory variable and treats the capital output ratio as part of the regression constant. The steady state implications of the Solow model with regard to international technology differences also appear to matter for empirical studies of trade. In contrast to Hicks neutral technology differences, Harrod neutral technology differences may explain why countries have different factor intensities and end up in different cones of specialization.
    Date: 2006–06
  27. By: Harald Fadinger
    Abstract: This paper tries to contribute to the strand of literature that investigates the question to what extend differences in per capita income between countries are due to differences in factor endowments like human- and physical capital on the one hand and due to differences in technology on the other hand. In particular, I am trying to assess to what extend structural transformation, ie the ability of a country to specialize in the production of goods that intensively use the factors with which it is abundantly endowed, has an important role in determining cross country income differences. I find that when productivities are country specific, for realistic parameter values structural transformation plays little role and productivity differences between countries remain large. However, when I allow for factor augmenting technology differences and factors are complementary in sectoral production, there seem to be large differences in the productivity of physical capital that are strongly correlated with per capita income, while human capital seems to have an inverse hump shape. This result is ad odds with Caselli (2005), who finds that poor countries use capital more efficiently than rich countries, while having a lower productivity of human capital. Finally, I use trade data and the Heckscher-Ohlin-Vanek equations to assess the plausibility of my calibrations and find a good fit for the model with factor specific productivities and complementary factors.
    Date: 2006–06
  28. By: Sebastian Weber (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: This paper investigates the effects of different labor market structures on the level of unemployment. A theoretical interpretation of an open economy version of the Calmfors and Driffill framework with traded good sector and sheltered non traded good sector is presented, in which different wage-employment trade-offs faced by unions in traded and non traded goods sector as well as the degree of openness is taken into account. From a theoretical point of view the framework supports the idea of the hump-shaped relationship between the degree of centralization of the bargaining process and the level of unemployment, which is sustained even with increased openness. Countries with an intermediate level of bargaining are expected to benefit most in terms of lower unemployment from an increase in openness. In an empirical part, the model is applied to a panel of 20 OECD countries over the period 1970-2000 and the predictions of the model are tested. I find empirical support for both of the main hypothesis, particularly if the strength of the employment protection is additionally taken into account. The results render also support to the literature on the interaction of product market regulations and labor market institutions, as countries which face stronger competition in the product market from foreign producers stand to benefit more from a deregulation in the labor market via a weakening of the employment protection legislation.
    Keywords: Labor Market Institutions, Unemployment, Openness to Trade, Product Market Competition
    JEL: F16 J64 J51
    Date: 2006–10–01
  29. By: Jean Cavailhes (INRA-CESAER); Carl Gaigne (INRA-ESR); Jacques-Rrancois Thisse (CORE, Universite catholique de Louvain, Institute of Economic Analysis, Kyoto University, PSE, and CEPR.)
    Abstract: Our purpose is to investigate how the interplay between trade, commuting and communication costs shapes the economy at both the interregional and intraurban levels. Specifically, we study how economic integration affects the internal structure of cities and show how decentralizing the production and consumption of goods in secondary employment centers allows firms located in a large city to maintain their predominance. Several new results in both economic geography and urban economics are established, which all agree with empirical evidence.
    Keywords: city structure, secondary business centers, commuting costs, trade costs, communication costs
    JEL: F12 F22 R12 R14
    Date: 2006–09
  30. By: Rodolfo Cermeño; Sirenia Várquez
    Abstract: In this paper we investigate the relationship between the agricultural technological level and R&D expenditures, human capital and openness to international trade using cross country information for a sample of 104 countries and various sub samples over the period 1961-1991. We first model the unobservable technological level as a dynamic stochastic process in the context of a general translog production function, and then we relate the implied technological levels to the aforementioned variables. For comparison, alternative specifications of the production and its associated technological process are also considered. We find that the proposed model outperforms all of the alternative specifications. The results suggest that the technological gap between developed and less developed countries in agriculture has increased considerably over this period of time and that, overall, the technological levels are directly related to R&D expenditures, human capital and openness, although this relationship is not robust across the different groups of countries considered.
    Keywords: Agricultural production function, Agricultural technology, Dynamic error components models, Non-linear models, R&D expenditures, Human capital, Openness
    Date: 2005–06
  31. By: Gilles Koléda
    Abstract: Abstract I study the incentive that governments have to protect IPR in a trading world economy, focusing on the patent novelty requirement and its effect on growth an trade. I consider a world economy with ongoing innovation in two regions. The North is assumed to have a higher wage than the South, possibly a larger market for innovative products and a greater capacity for innovation. I introduce the heterogeneity of innovation size together with the obligation, given by Patent Office of each region, that the innovation size be higher than the patent novelty requirement. This patent characteristic stands to be a useable instrument to promote innovation and growth, and also a strategic trade policy instrument. I numerically determine the Nash equilibrium of the strategic game that results of the setting of patent’s novelty requirement by each regional authority. Then I study effects of an harmonization of the two patent systems, that is the setting of a common patent novelty requirement by a supra-regional organization.
    Keywords: novelty requirement (patent height), innovation, growth, quality ladders, patent harmonization, TRIP, North and South
    JEL: O34 O40 F43
    Date: 2005–06
  32. By: Daniel Becker; Erich Gundlach
    Abstract: We reconsider the effects of long run growth on relative factor prices across cones of specialization. We model economic growth as exogenous technological change. Allowing for capital biased technological change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones, depending on the size of the specific bias of technological change and on the specification of preferences. For a specific set of assumptions, we show that economic growth may encourage factor price equality across cones.
    Date: 2005–06
  33. By: Hiroshi Ohta
    Abstract: The simplest possible model of computable general equilibrium with trade is presented for purposes of diagranomics pedagogica while probing/revisiting the orthodox Hecksher-Ohlin (HO) and Stolper-Samuelson (SS) theorems hopefully shedding some new light on each. Set forth against the HO orthodoxy is an H.O. heresy. The latter reverses the former outcomes, and turns the Leontief paradox no paradox accordingly. Re the SS theorem this paper challenge their policy recommendation to “bribe” the poor (or even the rich) adversely affected from free trade by pondering the meaning of bribing squarely under the light of the ‘ideal types’ model proposed herein. The paper also attempts to extend/generalize its static model by incorporating into it a growth model a la Jensen-Larsen (2004).
    Date: 2005–06
  34. By: Liliana Meza González; Ana Belén Mora Yague
    Abstract: Using the National Survey on Employment, Wages, Technology and Training (Enestyc), this paper tries to find the relationship between increasing trade and the proportion of total income Mexican manufacturing firms invest on R&D. Based on two cross-sectional and a panel estimation procedures, the results confirm the idea that increasing the exposure to foreign markets affect the innovative efforts of Mexican firms. We also find that the firms engaging in some kind of R&D do not conform a random sample. More specifically, our results show that, in 1992, the probability of finding a firm engaging resources in some kind of R&D increased with size, a market diversification measure, and a measure of industrial market power at a 2-digit level, while the intensity of the R&D effort depended, on market power and an industry concentration measure. For the 1999 estimation our results show that the probability of R&D investment at a firm level increased with size, a market diversification measure, and exposure to foreign competition, while the magnitude of the R&D effort of a firm was determined by the decrease in average import tariffs at the industry level and by the exporting efforts of the firm. We find strong complementarities between public and private innovation efforts in both years, but find that younger firms are doing stronger R&D efforts in 1999. The 1992- 99 balanced panel results show that exporting firms invest more in R&D while import competing firms invest less, once size, market power and other control variables are taken into account. Our estimation indicates that exporting give firms a great incentive to innovate, and that not only large, but also small firms contribute to the R&D efforts of a nation.
    Keywords: R&D, trade liberalization, foreign direct investment, exposure to foreing markets
    Date: 2005–06
  35. By: Mustapha Sadni Jallab (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); René Sandretto (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Monnet Gbakou (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: This paper aims at extending some recent publications about the relationship between antidumping filings and macroeconomic factors by comparing the United States (US) and the European Union (EU), two major users of antidumping procedures. Results of our estimations confirm that the exchange rate exerts a similar influence in the two countries. Fluctuations in the real GDP influence antidumping filings only in the US. On the contrary, the evolution of industrial production does not play an important role in the US, while its impact is important in Europe. The reinforcement of international competition appears to significantly increase antidumping filings in the US while this relationship turns out not to be significant in Europe. Finally, some of the most important differences between the US and the EU seem to be explainable by the differences of<br />rules and practices implemented by the regulatory authorities.
    Keywords: dollar euro exchange rate ; antidumping initiations ; negative binomial model ; unfair trade
    Date: 2006–11–08
  36. By: Bih Jane Liu; An-Chi Tung
    Abstract: Exporting and FDI have traditionally been two major firm-level responses to globalization. Export outsourcing (EO), a new strategy that gained in importance recently, has now become another alternative. This paper seeks to examine how firms choose between EO and outward FDI by looking into firm-level productivity differences. A special data set is constructed by consolidating two micro data sets of Taiwanese manufacturing firms. The paper contributes in four main ways. First, it provides a causality analysis of labor productivity and EO, whereas previous studies deal only with correlations. Second, it shows that EO can be interpreted as an indirect way of exporting. Third, it points out that outward FDI itself may not help with productivity if it is not linked with EO, which finding contradicts conventional wisdom. Finally, most evidences seem to imply that the intricate Taiwan-China interconnection is a significant factor that facilitates or contributes to all above-mentioned findings.
    Keywords: productivity, exports, foreign outsourcing, FDI, firm-level data
    Date: 2005–06

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